How a Delay in Your EMI can affect Your Financial Health?
Sometimes, people forget to maintain the necessary balance in their bank account at the time of the EMI deduction date. Then they have to pay a penalty to the bank. It will also damage their credit history, which is created over years of consistent repayment. To maintain your financial health, it is important to pay your EMIs on time.
A delay in the EMI payment for one day can impact your credit score. Let’s understand this with an example: Ankit, who had taken a home loan, learned this lesson the hard way. An EMI delay in his home loan and a linked top-up loan resulted in a huge drop in his credit score. His CIBIL score was 805 in August 2024 and dropped by 30 points to 775 in September 2024; except for making the next repayment on time, the score remained unchanged in October 2024. His experienced credit score dropped by 12 points, declining from 740 in August 2024 to 728 in September 2024.
Small Drop In Credit Score Can Make Your Loan Expensive:
You have to pay penal charges to the bank if there is a payment default on the EMI date. A Tax Professional said, “Delayed or missed payment can lead to fees, penalties from the lender, and a negative impact on the credit score.”
If your credit score is around a severe level, your next loan may cost you more, as you’ll need to accept a higher interest rate.
A Big Delay in EMI Can Damage The Credit Score:
The negative impact of the recent default is significant. A CIBIL official said, “Every credit information company has their own proprietary algorithm for calculating an individual’s credit score, Centred around the loan payment behaviour of the individual, which is the most important element of the score composition Delying credit card payments or EMI for one day and credit institutions report this, that may lower the CIBIL score of an individual”.
